As insurers strive for agility and scalability in the digital age, their mainframe infrastructure plays a critical role in either enabling or hindering progress. While mainframes were once central to core operations, many legacy systems struggle to meet the demands of today’s customer expectations and rapid digital advancements. This article highlights why smart insurers are prioritizing mainframe modernization as a crucial step towards achieving business capabilities, driving innovation, and adopting a cloud operating model.
Recognizing the Need for Mainframe Modernization: Insurers are driven by the desire to achieve a digital end-state, leveraging cloud-based functionalities that offer speed, efficiency, and cost-effectiveness. Modernizing the mainframe infrastructure is the final leg of this transformative journey, enabling insurers to reimagine their business processes and unlock the full potential of a cloud-driven environment.
Market Forces and the Demand for Agility: Insurers face increasing pressure to adapt and respond quickly to changing market dynamics. Factors such as rising expenses, higher claims, the impact of the global pandemic, and predicted economic downturns all contribute to this need for agility. In a high-interest rate environment with predicted volatility, cost reduction becomes paramount, and mainframe maintenance costs present a recurring challenge.
Sector-Specific Agility Requirements: Different sectors within the insurance industry manifest agility needs in various ways. Property and Casualty (P&C) insurers must focus on differentiating themselves in the market while commoditizing non-differentiating aspects. The Life & Annuity (L&A) and Retirement industry can benefit from unlocking distribution channels, currently hindered by mainframe dependencies. Therefore, modernizing the mainframe is critical for enabling digital channels. Group and Retirement insurers face the task of comprehensive transformation to improve customer relationships and gain a competitive edge. Meanwhile, Group and Health insurers grapple with cost reduction imperatives and seek growth opportunities by incorporating wellness offerings into their portfolios.
The Clear Cost Perspective: The case for mainframe modernization becomes evident when considering the increasing demands placed on insurance infrastructure. Business capabilities drive up Million-Instructions-Per-Second (MIPS) usage and costs. Legacy mainframes also rely on a diminishing pool of skilled talent for maintenance and upkeep, as senior employees retire. Failing to address these challenges poses a significant business risk down the line.
Conclusion: Smart insurers recognize the pivotal role of mainframe modernization in achieving agility, driving innovation, and adopting a cloud operating model. As market forces and customer expectations continue to evolve rapidly, insurers understand the imperative to transform their legacy mainframes to keep pace with the industry’s changing demands. By embracing modernization initiatives, insurers can unlock new business capabilities, enhance customer experiences, and position themselves for long-term success in the digital era.